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ICOBS 8.1 Insurers: general

ICOBS 8.1.1 R RP

1An insurer must:

  1. (1)

    handle claims promptly and fairly;

  2. (2)

    provide reasonable guidance to help a policyholder make a claim and appropriate information on its progress;

  3. (3)

    not unreasonably reject a claim (including by terminating or avoiding a policy); and

  4. (4)

    settle claims promptly once settlement terms are agreed.

ICOBS 8.1.2 R RP

A rejection of a consumerpolicyholder's claim is unreasonable, except where there is evidence of fraud, if it is for:

  1. (1)

    non-disclosure of a fact material to the risk which the policyholder could not reasonably be expected to have disclosed; or

  2. (2)

    non-negligent misrepresentation of a fact material to the risk; or

  3. (3)

    breach of warranty or condition unless the circumstances of the claim are connected to the breach and unless (for a pure protection contract):

    1. (a)

      under a ‘life of another’ contract, the warranty relates to a statement of fact concerning the life to be assured and, if the statement had been made by the life to be assured under an ‘own life’ contract, the insurer could have rejected the claim under this rule; or

    2. (b)

      the warranty is material to the risk and was drawn to the customer's attention before the conclusion of the contract.

ICOBS 8.2 Motor vehicle liability insurers

Application: who? what?

ICOBS 8.2.1 R RP
  1. (1)

    This section applies to a motor vehicle liability insurer.

  2. (2)

    The rules in this section relating to the appointment of claims representatives apply in relation to claims by injured parties resulting from accidents occurring in an EEA State other than the injured party'sEEA State of residence which are caused by the use of vehicles insured through an establishment in, and normally based in, an EEA State other than the injured party'sEEA State of residence.

  3. (3)

    The rules in this section relating to claims handling apply in respect of claims arising from any accident caused by a vehiclenormally based in the United Kingdom.

[Note: article 1 of the Fourth Motor Insurance Directive and article 4(4)(4e) of the Fifth Motor Insurance Directive]

Requirement to appoint claims representatives

ICOBS 8.2.2 G

A firm must have a claims representative in each EEA State other than the United Kingdom (see threshold condition 2A).

Conditions for appointing claims representatives

ICOBS 8.2.3 R RP

A firm must ensure that each claims representative:

  1. (1)

    is responsible for handling and settling a claim by an injured party;

  2. (2)

    is resident or established in the EEA State where it is appointed;

  3. (3)

    collects all information necessary in connection with the settlement of a claim and takes the measures necessary to negotiate its settlement;

  4. (4)

    possesses sufficient powers to represent the firm in relation to an injured party and to meet an injured party's claim in full; and

  5. (5)

    is capable of examining cases in the official language(s) of the EEA State of residence of the injured party.

[Note: article 4(1), (4) and (5) of the Fourth Motor Insurance Directive]

ICOBS 8.2.4 G RP

The requirement to possess sufficient powers does not prevent a claims representative from seeking additional authority or instructions if needed. It does prevent it from declining to deal with, or transferring responsibility for, claims properly referred to it by an injured party, or their representative.

Notifying the appointment of claims representatives

ICOBS 8.2.5 R RP
  1. (1)

    A firm must notify to the information centres of all EEA States:

    1. (a)

      the name and address of the claims representative which they have appointed in each of the EEA States;

      [Note: article 5(2) of the Fourth Motor Insurance Directive]

    2. (b)

      the telephone number and effective date of appointment; and

    3. (c)

      any material change to information previously notified.

  2. (2)

    Notification must be made within ten business days of an appointment or of a material change.

Motor vehicle liability claims handling rules

ICOBS 8.2.6 R RP

Within three months of the injured party presenting his claim for compensation:

  1. (1)

    the firm of the person who caused the accident or its claims representative must make a reasoned offer of compensation in cases where liability is not contested and the damages have been quantified; or

  2. (2)

    the firm to whom the claim for compensation has been addressed or its claims representative must provide a reasoned reply to the points made in the claim in cases where liability is denied or has not been clearly determined or the damages have not been fully quantified.

[Note: article 4(6) of the Fourth Motor Insurance Directive and article 4(4)(4e, first paragraph) of the Fifth Motor Insurance Directive]

ICOBS 8.2.7 R RP
  1. (1)

    If liability is initially denied, or not admitted, within three months of any subsequent admission of liability, the firm must (directly, or through a claims representative) make a reasoned offer of settlement, if, by that time, the relevant claim for damages has been fully quantified.

  2. (2)

    If an injured party's claim for damages is not fully quantified when it is first made, within three months of the subsequent receipt of a fully quantified claim for damages, the firm must (directly, or through a claims representative) make a reasoned offer of damages, if liability is admitted at that time.

ICOBS 8.2.8 R RP

A claim for damages will be fully quantified for the purpose of this section when the injured party provides written evidence which substantiates or supports the amounts claimed.

Interest on compensation

ICOBS 8.2.9 R RP
  1. (1)

    If the firm, or its claims representative, does not make an offer as required by this section, the firm must pay simple interest on the amount of compensation offered by it or awarded by the court to the injured party, unless interest is awarded by any tribunal.

  2. (2)

    The interest calculation period begins when the offer should have been made and ends when the compensation is paid to the injured party, or his authorised representative.

  3. (3)

    The interest rate is the Bank of England's base rate (from time to time), plus 4%.

[Note: article 4(6) of the Fourth Motor Insurance Directive. Regulation 6 of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 makes this rule actionable under section 150 of the Act (Actions for damages) by any person who suffers loss as a result of its contravention]

ICOBS 8.2.10 R RP

A firm will be taken to have received a claim, or a fully quantified claim, for damages when the claim is delivered to it, or a claims representative, by any person by any method of delivery which is lawful in the firm's, or its claims representative's, respective State of residence or establishment.

ICOBS 8.2.11 G RP

The provisions in this section are not intended to, and do not, restrict any rights which the injured party, or its motor vehicle liability insurer, or any other insurer acting on its behalf, may have and which would enable any of them to begin legal proceedings against the person causing the accident or that person's, or the vehicle's, insurers.

ICOBS 8.3 Insurance intermediaries (and insurers handling claims on another insurer’s policy)

Application: who?

ICOBS 8.3.1 G RP

This section applies to an insurance intermediary, and to an insurer handling a claim on another insurance undertaking'spolicy.

Interaction with the general law

ICOBS 8.3.2 G RP

A firm is expected to comply with the general law on the duties of an insurance intermediary. This section does not seek to set out the full extent of those duties.

Conflicts of interest

ICOBS 8.3.3 G RP
  1. (1)

    Principle 8 requires a firm to manage conflicts of interest fairly.

  2. (2)

    Generally, this means that a firm handling a claim should not put itself in a position where its own interest, or its duty to anyone for whom it acts, conflicts with its duty to a customer. If it does so, it should have the customer's prior informed consent.

  3. (3)

    If a firm acts for a customer in arranging a policy, it is likely to be the customer's agent (and that of any other policyholders). If the firm intends to be the insurance undertaking's agent in relation to claims, it needs to consider the risk of becoming unable to act without breaching its duty to either the insurance undertaking or the customer making the claim. It should also inform the customer of its intention.

  4. (4)

    A firm should consider whether it is possible to manage such a conflict through disclosure and consent. An example where these are unlikely to be sufficient is where the firm knows both that its customer will accept a low settlement to obtain a quick payment, and that the insurance undertaking is willing to settle for a higher amount.

Dealing with claims notifications without claims handling authority

ICOBS 8.3.4 G RP

A firm that does not have authority to deal with a claim should forward any claim notification to the insurance undertaking promptly, or inform the policyholder immediately that it cannot deal with the notification.